A complexity theory approach to IT-enabled services (IESs) and service innovation: Business analytics as an illustration of IES

• Complexity theory is suitable for understanding IES (e.g., business analytics service) and IES innovation.
• IES can be effectively conceptualized as complex adaptive systems (CAS).
• The environment of IES is rugged and dancing and co-evolves with IES.
• IES innovation is a co-evolutionary process of variation, selection, and retention (VSR).
• Organizations can increase IES innovation by adopting a guided VSR.

While firms view services as the main source of their revenue and competitive advantage, understanding of service and service innovation is limited. This lack of understanding is especially significant in IT-Enabled Services (IESs) and IES innovation. Much work is needed to understand the contemporary trend of integrating diverse material and social resources to address complex organizational and individual needs. This article proposes a novel framework for IES and IES innovation and develops propositions and implications for research and practice. This work draws upon the tenet of complexity theory and conceptualizes IES as complex adaptive systems (CAS), with such properties and behaviors as diverse adaptive elements, nonlinear interaction, self-organization, and adaptive learning, and IES innovation as a co-evolutionary process of variation, selection, and retention (VSR). The proposed framework is illustrated using business analytics (BA) as a new kind of decision support service (DSS) throughout this paper. Several propositions are developed. Finally, we present a discussion and implications.